Let's be up front and get to the answer first - "Guaranteed Financing" is a fallacy and doesn't exist. At least not in the form that you think it does. There are a number of companies out there making bold claims about "getting you approved regardless of credit" or even worse "no credit check financing" and while some of these companies may in fact offer that service, there are almost certainly caveats and strings attached. In this article I will go over some of the worst tricks and tactics that dealerships use to lure you into the door.
What it Means to YOU versus What it Means to THEM
When we think of "guaranteed financing" we think of it simply as a 100% chance that we are going to get approved for a loan in its purest form. Unfortunately there are really no bounds as to what exactly that loan has to be so it is simple for a dealership to skirt the definition. As long as a dealer is giving you an option, they technically have upheld their end of the bargain. In that sense, they could give you an approval with the requirement of climbing Mount Everest without oxygen.
Common Tricks, Tactics & Myths
As stated from the start, the biggest myth of all is simply that guaranteed approvals exist. Most commonly the term is used as a simple tool to get buyers into their showroom or onto their lot. From there they can prey on those that may think their credit is worse than it actually is. But wouldn't it be illegal to advertise something that doesn't actually exist. In short, yes. But here are a few methods used that allow a shady dealership to skirt those laws ...
Burner Units - Some dealerships have a unit in their inventory that they have very little to no stake in that is used precisely for guaranteed approvals. This could be old inventory, a low value trade-in or even an auction purchase. Typically these either have little to no service work done, are known lemons or have rebuilt titles. In most cases they will be sold well over and above book value. The dealership will make you feel like it is your only option and often suggest that you will be able to "trade it in for exactly what you want" later on.
Extremely High Down Payment - A higher down payment may help to get approved for financing. In general this may not always be a shady practice as an "equity deal" could get you approved in situations where you otherwise would not have as there is less risk to the lender in the event of having to repossess. With that being said, many dealerships simply are not up-front that a down payment may be required with some going as far as saying things like "Guaranteed Financing" and "$0 Down OAC" in the same sentence making you believe that they are connected. In many cases they are not connected and in these circumstances you can expect to have to front 50% or more.
Layaway Plan - Again, not always a shady tactic but when combined with a "guaranteed approval" it is an easy out for the dealer. The idea is similar to requiring an extremely high down payment but in this instance the dealership will set up a payment plan to collect the down payment or even the entire purchase price before delivering the unit. This may also be combined with a burner unit which is extremely unappealing as a buyer but unfortunately those who are desperate might think its their only opportunity.
They Lie to You, Try and Prove It - This is probably the worst of all in that these dealerships simply do not care that they are committing fraud. The issue is that people who are in desperate situations simply don't have the means to go after a deceiving business. If you are face-to-face at a dealership the confrontation might not be worth the headache. I have even heard stories where when dealers are confronted or called out in person, the rebuttal they use is that the customer is approved to pay cash. Once confronted, the dealership will simply try and shoe you out the door.
How to Avoid These Scams
The simplest method of avoiding these scams is to avoid dealerships that advertise options that are too good to be true. In this industry the most expensive cost aside from inventory is customer acquisition. Unfortunately this means that many dealers will entice a customer by any means necessary. Here are a few simple points to keep in mind when you're looking to finance:
Be aware of the emotional aspect of purchasing a new-to-you toy. While it can be extremely exciting, don't let that cloud your judgement and be sure you understand the terms.
If a dealer won't break down numbers to where you understand - run. All rates and costs should be disclosed so you know exactly what you're paying.
Steer clear of dealers with over-the-top, aggressive advertising with words like "guaranteed", "everyone approved" or "no credit checks" and if you do visit these dealers, ask a ton of questions and rehash points 1 and 2 above.
Find a dealer who will grant you an approval prior to shopping. There are some dealerships out there such as our sponsor partners at Revival Powersports who are willing to get you numbers ahead of time so you can know what you qualify for. If it isn't something you can afford at this time you may want to consider building some positive credit with a lower priced option first.
As always thank you for reading! The Fred Finds Rides team wishes you the best in your shopping. There are options out there that are honest and up front. Pick those and you'll definitely have a far better experience. And lets face it, buying a motorcycle, ATV, snowmobile or RV should be fun! Your friend,
Fred
This article is brought to you in part by support from our sponsors at Revival Powersports.
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